FTC says pay-to-delay getting worse; GPhA says nonsense

The war of words over so-called pay-to-delay deals between branded and generic drugmakers has ratcheted up ahead of the U.S. Supreme Court's consideration of their legality. The Federal Trade Commission issued a report Thursday saying the problem is getting worse, while the CEO of the Generic Pharmaceutical Association (GPhA) shot back that the FTC has no idea what it's talking about.

The FTC, which under the current administration has aggressively fought the arrangements, said Thursday that in fiscal 2012 drugmakers reached 40 settlements on patent disputes. That's "significantly higher" than the 28 the year before. In 19 of the arrangements, drugmakers may have agreed not to bring out an authorized generic. There were agreements for 31 different brand-name pharmaceutical products with combined annual U.S. sales of more than $8.3 billion, the FTC said. "Sadly, this year's report makes it clear that the problem of pay-for-delay is getting worse, not better," said FTC Chairman Jon Leibowitz.

GPhA CEO Ralph G. Neas in a statement retorted that, "The FTC is wrong on the facts, wrong on the public policy and wrong on the law." He claimed that the settlements have never stopped generic competition beyond a patent expiration and that they often lead to generics hitting the market earlier and saving consumers big bucks.

The Supreme Court agreed to take up the issue in its current session. The court will focus on a case in which the FTC went after Abbott Laboratories ($ABT) for paying Watson Pharmaceuticals ($WPI) and other generic drugmakers as much as $42 million a year to keep Solvay Pharmaceuticals' AndroGel treatment for low testosterone off the market for up to 8 years. Solvay is now owned by Abbott.

The deals have also generated litigation from pharmacy operators. A passel of companies have joined an antitrust lawsuit alleging that Pfizer's ($PFE) Wyeth unit and Teva Pharmaceutical Industries ($TEVA) colluded to delay generic versions of the blockbuster Effexor XR, causing them, and consumers, to overpay for the antidepressant. They point out that Effexor XR brought in $2.5 billion a year as long as the generics were delayed. Since the advent of copycat versions in July 2010, sales have declined. In 2011, Effexor sales were $678 million, a 61% drop from the previous year.

The FTC's report even tied its position to the debate over the national debt, saying that the deals cost patients, and the federal government as a payer, an extra $3.5 billion a year. It claims that making them illegal would cut the nation's debt by $5 billion over the next decade. There is a chance that the court will not get the matter resolved, however. Justice Samuel A. Alito Jr. recused himself from hearing this case, leaving open the possibility for a 4-4 tie.